Asymmetric Effect of the Oil Price in the Ecuadorian Economy

Abstract

This paper aims to identify whether there is an asymmetric response of the output to positive and negative changes in the price of oil. We take the case of Ecuador, an oil exporter but also an importer of derivates of the same commodity. We implement the local projections methodology to estimate this asymmetric response through state-dependence impulse response function. The results evidence that the negative variations of oil prices affect the Ecuadorian GDP more than when this commodity is rising. Also, we show that the persistence of the effect is higher when the oil price fall than there are positive variations.

Keywords: Asymmetry, Oil Price, local projections, Growth, Ecuador